Australia-bound FPSO on track for first gas in 2025 but BW Offshore facing cost overruns (Gallery)

Norway’s floating production solutions provider BW Offshore is anticipating additional costs of up to $150 million for the completion of the remaining work related to its newbuild floating production storage and offloading (FPSO) vessel, which is anticipated to start work at a Santos-operated giant gas project off the coast of Australia in the second quarter of 2025.

Following a contract in March 2021 for the construction, connection, and operation of an FPSO, now known as BW Opal, destined for the Barossa field, the final investment decision (FID) for the project, kick-started a $600 million investment in the Darwin LNG life extension and pipeline tie-in projects. BW Offshore picked Dyna-Mac to build the topside modules for the vessel.

This Australian development project located 300 kilometers off the coast of Darwin encompasses the FPSO Opal, subsea production wells, supporting subsea infrastructure, and a gas export pipeline tied into the existing Bayu-Undan to Darwin LNG pipeline to extend the facility life for around 20 years. The Gas Export Pipeline (GEP) to deliver gas from the field to Darwin LNG has been completed.

In addition, construction activities for the Darwin Pipeline Duplication are underway. The Barossa project is a joint venture between Santos (50%), SK E&S (32.5%), and JERA (12.5%). BW Offshore disclosed a $1.15 billion project debt financing in September 2021 for the construction and operation of the FPSO, which will handle natural gas production at the Barossa field, thanks to the 4.6 billion, 15-year FPSO contract, with additional ten-year extension options.

The first shipboard turret module was integrated into the hull on February 4, 2024. According to BW Offshore, the Barossa project is progressing in line with its schedule. As of the end of October 2024, the project was 90% completed. The FPSO BW Opal is undergoing commissioning and preparations for sail-away from the yard in Singapore, where it will be towed to the field in Australia.

The integration is 95% completed with pre-commissioning and commissioning well underway, thus, the FPSO is on track to be ready for the first gas in the second quarter of 2025. However, BW Offshore claims that closing out variation orders and prioritizing the schedule, combined with additional manhours at the yard is expected to lead to net additional investments of $100 – $150 million until project completion.

The project CAPEX totaled $2.16 billion at the end of Q3 2024. With a processing capacity of up to 900 million standard cubic feet per day (mmscfd) of gas and a design capacity of 11,000 barrels per day of stabilized condensate, the FPSO is expected to head to Australia in the first quarter of 2025. The first gas at the project is due in the third quarter of 2025.

Marco Beenen, CEO of BW Offshore, commented: “As the BW Opal is nearing completion, we remain focused on maintaining schedule and preparing for the FPSO sail-away at the end of first quarter next year. I am pleased with the consistent high commercial uptime of the operational fleet, which continues to deliver steady cash flow. We see a continued active FPSO market with high tendering activity in which we are selectively progressing project opportunities.”

BW Offshore expects its fleet to continue to generate significant cash flows in the time ahead, supported by the $5.4 billion firm contract backlog at the end of September 2024. The firm’s FPSO fleet continued to deliver stable uptime in the quarter with a weighted average fleet uptime of 98.9%.

The floating production solutions provider emphasizes that the growing energy demand continues to drive interest in developing new infrastructure-type FPSO projects with long production profiles, low break-even costs, and a focus on lower emissions.

BW Offshore underlines that increased project complexity and higher construction costs necessitate financial structures with significant day rate prepayments during construction for lease and operate projects.

The firm underscored: “Alternatively, oil and gas majors may finance and own FPSOs, relying on FPSO specialists for the design, construction and installation scope, combined with operation and maintenance services. BW Offshore is well positioned to offer both solutions. In recent years, the number of sanctioned FPSO projects have lagged market expectations. Consequently, there is a growing number of projects at various stages of maturity, reflecting a pent-up demand for FPSOs.

“This is reflected in increased FEED and tendering activity, and an expectation that a number of potential FPSO projects in which BW Offshore is engaging with will reach a final investment decision over the next 12 to 36 months. It is also expected that this dynamic, combined with the high levels of competence required, will result in better risk-reward and improved margins for FPSO companies going forward.”

BW Offshore claims to be actively applying its offshore engineering and operational capabilities to drive future value creation within the energy transition by developing low-carbon and clean energy production solutions.

To this end, the firm is exploring new ventures that are perceived to target significant market opportunities emerging within gas-to-power, ammonia, and carbon capture, as well as combining FPSO and floating offshore wind capabilities to grow in new adjacent areas.